Commitment Management in SAP #1 An Overview Overview

Commitment Management in SAP tracks future commitments against cost objects; this enables users to make a realistic comparison of actual cost plus committe cost against plan ! bu get on that cost object" Commitments are ma e when user creates purchasing ocuments to purchase goo s or services at a future ate" Comparing actual against bu get is mislea ing unless #ou factor in the outstan ing commitments that will convert to actual cost in the future" $n this blog% $ will provi e an overview of Commitment Management in SAP"

&logs on Commitment Management

In my series of blogs on Commitment Management, I intend to explain and elaborate the concepts behind Commitment Management. I will demonstrate how Commitment Management works in SAP. To identify the series of blog, I ha e categorised the blogs !nder SAP " Commitment Management in SAP. If yo! ha e #!estions$ comments$ s!ggestions, please send me yo!r comments in the form below. Sharing yo!r #!estions and experience !sing comment box below will help other readers to gain additional knowledge in ol ed in this f!nctionality.

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%& Commitment Management in SAP %& An ' er iew ()*$+,$)+&)%) Commitment Management in SAP %) The process (.&$+,$)+&)%. Commitment Management in SAP %. Acti ation (+/$+0$)+&)%* Commitment Management in SAP %* 1imitations (&*$+0$)+&)-

Assumption for this blog

The blog refers to Cost Center as the cost ob2ect. 3owe er, any reference to Cost Center will apply similarly to Internal 'rder and Pro2ect as Cost 'b2ects.

Commitment Management
Commitment represents a f!t!re cost committed against cost ob2ect. Cost Commitments occ!r when a p!rchasing doc!ment (like a P!rchase 4e#!isition, P!rchase 'rder- is iss!ed to a endor for pro ision of goods or ser ice. If p!rchasing doc!ment is iss!ed specifically against a (for example- cost center, the al!e of the p!rchasing doc!ment will represent a legal and binding commitment to inc!r costs in f!t!re against this cost center. If a p!rchasing doc!ment is iss!ed for p!rchase of goods for stock, these are not commitments against a cost ob2ect5 hence, s!ch doc!ments will not form part of Commitment Management f!nctionality in SAP. SAP tracks Commitments against cost ob2ects for information and reporting p!rposes only. 6o! cannot directly !se commitments to pre ent !ser from creating more commitments (or creating more P!rchase 'rders- against the specific cost ob2ect (that feat!re is falls !nder A ailability Control in SAP-. Commitments representing !nf!lfilled P!rchase 'rders will add to the commitment amo!nt against the cost ob2ect5 commitments are inc!rred in the transaction c!rrency of the p!rchase order and are then con erted to local, gro!p and controlling area c!rrency for reporting.

'he process of Commitment Management

Commitment amo!nts flow thro!gh , stages7

Create Commitment Use Commitment Fulfil Commitment Report Commitment Carry Forward Commitment

Create Commitment
Commitments are created against cost center when p!rchasing doc!ments are iss!ed for deli ery of goods or ser ices to that cost center. The commitment amo!nt is the amo!nt of the P!rchase 'rder in p!rchase order c!rrency. SAP con erts this transaction c!rrency to 1ocal C!rrency, 8ro!p C!rrency and Controlling Area c!rrency.

Use Commitment
Commitments are !sed or Commitment amo!nts are red!ced when the goods or ser ices against these p!rchase orders are recei ed. If the goods or ser ice receipt is a partial receipt, then the balance on the p!rchase order is the o!tstanding amo!nt of commitment.

Fulfil Commitment
If the goods or ser ice receipt is a f!ll receipt against the P!rchase 'rder or completes the deli ery against the P!rchase 'rder, then the balance on the p!rchase order is 9ero and the commitment is f!lfilled and the o!tstanding amo!nt of commitment is 9ero.

Report Commitment
Commitment amo!nt is information a ailable for reporting. SAP has standard reports that compare the cost ob2ect b!dget against act!al and commitment.

Carry-forward commitment
At the year:end, c!stomers sho!ld carry forward the o!tstanding commitments to the next fiscal year. Commitments are carried forward to the first fiscal period of the next fiscal year. ;or example, o!tstanding commitment of period &&$)+&& is carried forward as commitment of period +&$)+&).

'he semantics of Commitment Management

Plan ! &u get are de eloped on indi id!al cost ob2ects as part of the reg!lar b!dgeting cycle. 3a ing a plan $ b!dget is not pre re#!isite to !sing Commitment Management in SAP. Commitment represents the o!tstanding amo!nt of !ndeli ered or !nser iced on the P!rchase 'rder. ;or a newly created P!rchase 'rder, it is the f!ll amo!nt of P!rchase 'rder. Commitment amo!nt incl!des deli ery charges b!t does not incl!de inp!t taxes. In other words, costs that will post against cost elements in Controlling form part of Commitment amo!nt. Actual cost is posted against cost centers when the goods are deli ered or ser ices performed against the P!rchase 'rder. The total of commitment cost and act!al cost represents the !tilised (<assigne = in SAP termsamo!nt against the cost center. The balance of amo!nt in b!dget !n:!tilised or o er:!tilised is the <available= amo!nt against b!dget.

Quantity-based or Value-based Commitment Management

;or p!rchase orders based on #!antity proc!red, the goods receipt or in oice receipt red!ces the commitment al!e and increases the act!al cost. ;or this yo! need #!antity:based commitment management. 'n the P!rchase 'rder7 > 8oods 4eceipt indicator set7 Commitment is red!ced when goods are recei ed. > 8oods 4eceipt Indicator is not set7 Commitment is red!ced when in oices are recei ed. If al!es for p!rchasing doc!ments determine the red!ction of a p!rchase order commitment, then yo! need al!e:based commitment management.

Commitment (eporting in SAP

Standard SAP reports can be !sed to report commitments against act!al and plan. ?elow is an example of a report.

Plan amo!nts ha e been !pdated against the cost center &.). as part of the planning cycle. At the time this report was exec!ted, the cost center has inc!rred act!al costs of @&.)), against cost element 0)&+.+. There are o!tstanding P!rchase 'rders worth @ *,+), against the same cost element. This means that the total <assigned= or !tilised amo!nt against cost element 0)&+.+ in cost center &.). is @ ,,),+ (@&,)), A @ *,+),-. This compares to plan amo!nt of @ ),+B..)*. The a ailable amo!nt is (negati e- @ .,&00,00. This means that the cost center &.). has o er spent an amo!nt of @ .,&00.00 against cost element 0)&+.+ for <third party fees= compared to the plan.

Conclusion
Commitments do not pre ent !ser from creating more commitments against b!dget $plan. 3owe er, this is an important feat!re in SAP beca!se it gi es !sers real time information of how far they ha e spent against plan. It helps them plan and meas!re how m!ch more commitments they can make before they exha!st the b!dget. Commitment Management in SAP is an easy:to:set!p and easy:to:!se feat!re in SAP. In the next blog, I will demonstrate how Commitment Management works in SAP.

Commitment Management in SAP #) 'he process Overview

Commitment Management in SAP tracks future commitments against cost objects; this enables users to make a realistic comparison of actual cost plus committe cost against plan ! bu get on that cost object" Commitments are ma e when user creates purchasing ocument to purchase goo s or services at a future ate" Comparing actual against bu get is mislea ing unless #ou factor in the outstan ing commitments that will convert to actual cost in the future" $n this blog% $ will emonstrate the process of *or the stages in+ Commitment Management in SAP"

&logs on Commitment Management

In my series of blogs on Commitment Management, I intend to explain and elaborate the concepts behind Commitment Management. I will demonstrate how Commitment Management works in SAP. To identify the series of blog, I ha e categorised the blogs !nder SAP " Commitment Management in SAP. If yo! ha e #!estions$ comments$ s!ggestions, please send me yo!r comments in the form below. Sharing yo!r #!estions and experience !sing comment box below will help other readers to gain additional knowledge in ol ed in this f!nctionality.

Share this blog with your network using one of the social media icons at the top or bottom of this page.
%& Commitment Management in SAP %& An ' er iew ()*$+,$)+&)%) Commitment Management in SAP %) The process (.&$+,$)+&)%. Commitment Management in SAP %. Acti ation (+/$+0$)+&)%* Commitment Management in SAP %* 1imitations (&*$+0$)+&)-

Assumption for this blog

This is the second blog in the series of blog on Commitment Management. It is a good idea to read the pre io!s blog before yo! read this blog. The blog refers to Cost Center as the cost ob2ect. 3owe er, any reference to Cost Center will apply similarly to Internal 'rder and Pro2ect as Cost 'b2ects.

'he process of Commitment Management

Commitment process flows thro!gh , stages7

Create Commitment Use Commitment Fulfil Commitment Report Commitment Carry Forward Commitment

Create Commitment
Commitments are created against cost center when p!rchasing doc!ments are iss!ed for deli ery of goods or ser ices to that cost center. There are three factors in a P!rchase 'rder that affect creation of commitments7

Purchase Order value: The commitment amount is the amount of the Purchase Order in purchase order currency. SAP converts this transaction currency to ocal Currency! "roup Currency and Controllin# Area currency. Account Assi#nment: Only Purchase Orders a#ainst cost centers! internal orders and pro$ects create commitments. The commitment is created in com%ination of that cost o%$ect and the correspondin# cost element specified in the Purchase Order

&elivery &ate: Commitment will only reflect in the period in which the commitment is due for delivery. For e'ample! if the delivery date on a Purchase order falls in period ()*)+(( and you e'ecute the commitment report for period ((*)+((! this Purchase Order will not reflect as a commitment.

?elow is an example of a P!rchase 'rder against cost center &.)*

The cost center report reflects the commitment amo!nt, which is the amo!nt of the P!rchase 'rder.

Use Commitment
Commitments are !sed or Commitment amo!nts are red!ced when goods or ser ices against these p!rchase orders are recei ed. If the goods or ser ice receipt is a partial receipt, then the balance on the p!rchase order is the o!tstanding amo!nt of commitment.

Upon #oods receipt: For every #oods receipt performed a#ainst the cost o%$ect! the system reduces the commitment value and increases the actual cost Upon invoice receipt ,where -"oods Receipt. indicator is not set on Purchase Order/: For every invoice receipt performed a#ainst the cost o%$ect! the system reduces the commitment value and increases the actual cost

I performed a partial goods receipt against the P!rchase 'rder *,+++&/)+, that I had created abo e.

This partial goods receipt (amo!nt @&,)),- red!ced the amo!nt of commitment and increased the amo!nt of act!al cost.

Fulfil Commitment
The commitment amo!nt red!ces to 9ero in the following sit!ations7

0f the #oods or service receipt is a full receipt a#ainst the purchase order! then the %alance on the purchase order is 1ero and the commitment is fulfilled and the outstandin# amount of commitment is 1ero. 2hen -delivery completed. indicator is set on the Purchase Order to indicate that no further #oods receipt are e'pected a#ainst that Purchase Order item

I will set the <deli ery completed= indicator on the P!rchase 'rder line item to indicate that the balance of ,+ !nits will not be deli ered.

This released the amo!nt of commitment and set the commitment from this P!rchase 'rder to 9ero.

2hen .Final 0nvoice. indicator is set on Purchase Order to indicate that no further invoices are e'pected a#ainst that Purchase Order item. This has the same effect as settin# the -&elivery Complete. indicator. 0t resets the commitment amount to 1ero.

I created a P!rchase 'rder *,+++&/)+/ with no 84 re#!ired. After a partial in oice, I will set this P!rchase 'rder to <;inal In oice=.

This will release the commitment and set the balance to 9ero.

0f you set the -loc3. or -mar3 for deletion. indicator on the Purchase Order * item

Report Commitment
Commitment amo!nt is information a ailable for reporting. SAP has standard reports that compare the cost ob2ects b!dget against act!al and commitment. There are se eral standard reports. ?elow are two commonly !sed reports. 6o! can do this from Controlling > Cost Center Accounting > Information Systems > Plan/Actual Comparisons > Cost Centers: Actual/Plan/Commitments

Plan amo!nts ha e been !pdated against the cost center &.). as part of the planning cycle. At the time this report was exec!ted, the cost center has inc!rred act!al costs of @&.)), against cost element 0)&+.+. There are o!tstanding P!rchase 'rders worth @ *,+), against the same cost element. This means that the total <assigned= or !tilised amo!nt against cost element 0)&+.+ in cost center &.). is @ ,,),+ (@&,)), A @ *,+),-. This compares to plan amo!nt of @ ),+B..)*. The a ailable amo!nt is (negati e- @ .,&00,00. This means that the cost center &.). has o er spent an amo!nt of @ .,&00.00 against cost element 0)&+.+ for <third party fees= compared to the plan. 6o! can also exec!te the report to compare b!dget against commitment and act!al Controlling > Cost Center Accounting > Information Systems > More Reports > Range: Actual/Budget/Commitments

There are f!rther reports to list Commitment line items. 6o! co!ld drilldown to this line item report from any of the abo e reports. If yo! want to create yo!r own report and !se Commitment as a field in that report, then Commitment amo!nt is a ailable as a field in 1ibrary xxx Table xxxx

Carry-forward commitment
At the year:end, c!stomers sho!ld carry forward the o!tstanding commitments to the next fiscal year. Commitments are carried forward to the first fiscal period of the next fiscal year. ;or example, o!tstanding commitment of period &&$)+&& is carried forward as commitment of period +&$)+&). 6o! can do this from Controlling " Cost Center Acco!nting " 6ear:Cnd Closing " Commitment Carryforward

Conclusion
The process to create and f!lfil or carryforward commitments is ery simple. The transaction to post Commitment occ!rs in the backgro!nd as !sers process b!siness transactions. Commitment al!es are then a ailable as information for reporting p!rposes.

Commitment Management in SAP is an easy:to:set!p and easy:to:!se feat!re in SAP. In the next blog, I will explain the steps to acti ate and config!re Commitment Management.

Commitment Management in SAP #, Activation Overview

Commitment Management in SAP tracks future commitments against cost objects; this enables users to make a realistic comparison of actual cost plus committe cost against plan ! bu get on that cost object" Commitments are ma e when user creates purchasing ocument to purchase goo s or services at a future ate" Comparing actual against bu get

is mislea ing unless #ou factor in the outstan ing commitments that will convert to actual cost in the future" $n this blog% $ will provi e an overview of the steps to activate an configure Commitment Management in SAP"

&logs on Commitment Management

In my series of blogs on Commitment Management, I intend to explain and elaborate the concepts behind Commitment Management. I will demonstrate how Commitment Management works in SAP. To identify the series of blog, I ha e categorised the blogs !nder SAP " Commitment Management in SAP. If yo! ha e #!estions$ comments$ s!ggestions, please send me yo!r comments in the form below. Sharing yo!r #!estions and experience !sing comment box below will help other readers to gain additional knowledge in ol ed in this f!nctionality.

Share this blog with your network using one of the social media icons at the top or bottom of this page.
%& Commitment Management in SAP %& An ' er iew ()*$+,$)+&)%) Commitment Management in SAP %) The process (.&$+,$)+&)%. Commitment Management in SAP %. Acti ation (+/$+0$)+&)%* Commitment Management in SAP %* 1imitations (&*$+0$)+&)-

Assumption for this blog

This is the third blog in the series of blog on Commitment Management. It is a good idea to read the pre io!s two blogs before yo! read this blog. The blog refers to Cost Center as the cost ob2ect. 3owe er, any reference to Cost Center will apply similarly to Internal 'rder and Pro2ect as Cost 'b2ects.

Activate Commitment Management

Commitment Management is, generally, acti ated at three le els7

Controllin# Area Cost O%$ect Confi#uration and*or Cost O%$ect 4aster &ata

Activate Commitment Management for Controlling Area

Commitment Management sho!ld be acti ated at Controlling Area le el before it can be acti ated for cost ob2ects. ;rom IM8 Path [IMG Controlling > General Controlling > !rgani"ation > Maintain Controlling Area

Activate Commitment Management for Cost Center

;or Cost Centers, yo! can acti ate Commitment Management by cost center categories. If Commitment Management is acti ated for a specific cost center category, then all cost centers

created !nder this category are a!tomatically acti ated for Commitment Management. This is !sef!l if (as an example- yo! want to track Commitments for all cost centers assigned to <Management= cost center category. ;rom IM8 Path [IMG Controlling > Cost Center Accounting > Master #ata > Cost Centers > #efine Cost Center Categories

Alternati ely, yo! can acti ate Commitment Management by indi id!al cost center. In this case, the !ser sho!ld switch the indicator on cost center master to acti ate Commitment Management for that cost center.

Activate Commitment Management for $nternal Or ers

Commitment Management can be acti ated for Internal 'rder Types in the config!ration. ;rom IM8 Path [IMG Controlling > Internal !rders > Commitments and $unds Commitments > Acti%ate Commitments Management

Activate -alue.base Commitment Management

If al!es for p!rchasing doc!ments determine the red!ction of a p!rchase order commitment, then yo! need al!e:based commitment management. To acti ate al!e:based Commitment Management, switch on the indicator in the Dnit of Meas!rement config!ration. In the IM8 Men! [IMG SAP &et'ea%er > General Settings > C(ec) *nit of Measurement+

Conclusion
'ther than the abo e acti ation steps, there is no other config!ration re#!ired to !se the f!nctionality of Commitment Management. Commitment data will stack !p in data tables in the backgro!nd as !sers process front:end transactions. This data can be !sed for reporting.

If standard Commitment Management reports do not s!it yo!r re#!irements, yo! can create new reports !sing 4eport Painter$ 4eport Eriter or in yo!r ?!siness Intelligence tool !sing standard SAP data library. Commitment Management in SAP is easy to set!p and offers !sef!l feat!res. In the next blog, I will re eal some tricky iss!es faced by SAP c!stomers5 I will also list certain limitations in Commitment Management f!nctionality in SAP that yo! need to be aware of.